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Horwath Examines Luang Prabang’s High-end Hotel Scene
Horwath HTL – the global leader in hotel, tourism and leisure consulting – released “Luxury & Upper Upscale Hotel Market Overview Luang Prabang” in April 2019, which spotlights upcoming supply, delves into annual occupancy rates and ADR, and provides a peek into the future. Pullman Luang Prabang According to the Horwath report, only seven hotels meet their criteria for this sector, which is based on the quality of rooms and service, brand recognition, F&B variety, and an average daily room rate (ADR) above $200. It places these properties in three zones: the Old Town Peninsula (Zone 1), the area bordering Old Town (Zone 2), and outside of the main UNESCO site (Zone 3). None currently stand in Zone 1. Zone 2 includes the Amantaka, AVANI+, Belmond La Residence Phou Vao, Luang Say Residence, and Sofitel. Pullman and Rosewood sit in Zone 3.The report also notes nine upscale hotels with ADRs below $200. ADR & Annual Occupancy Start to Sink In 2014 and 2015, the high-end segment recorded an ADR of $332, with an annual occupancy rate of about 35%. Occupancy jumped to 40% in 2016, while ADR slid 3% to $323. AVANI+, Rosewood, and Pullman came on the scene in 2017 and 2018, increasing supply in the high-end segment by 54%. This prompted ADR and occupancy to continue to fall. In 2017, the ADR tumbled 4% to $310, while occupancy fell to 38%. Numbers continued to drop in 2018, with ADR sinking 5% to $293 with occupancy dipping to 34%. Meanwhile, visitor arrivals to Luang Prabang continued to climb from 379,000 in 2014 to 576,610 in 2018, according to the Lao Ministry of Information, Culture and Tourism’s 2018 Statistical Report. Horwath states the occupancy dive is due to the inability for the high-end sector to absorb the large increase in room supply. “Basically, negative occupancy growth is due to supply outstripping demand in 2017-18,” the report said. “Market demand in Luang Prabang has demonstrated to be relatively rate sensitive, and hoteliers have been finding it difficult to grow rates.” The report added, “In 2018, the overall ADR dropped sharply due to the discounted rates from Pullman in its first year of opening.” The hotel offers 123 rooms, and needed to offer reduced rates to fill rooms, it said. How They Book Horwath divided super high-end bookings into four categories. Wholesale FIT leads the field at 39%. Direct FIT (22%) and OTAs (20%) follow, though the report considers OTA bookings as a subset of Direct FITs. Group/MICE bookings come in at 19%. 1. Wholesale FIT Wholesale FIT has traditionally been a luxury hotel’s largest demand source, but this has been gradually declining due to a rise in direct FIT and OTA bookings, the latter of which results in lower ADR, according to the report. High-end hotels with large inventories often rely on wholesale FITs, but most of Luang Prabang’s luxury properties have small room counts. They depend too heavily on the state of Lao tourism (see below), and are usually part of a multi-country tour organized by agents or DMCs. This segment is mostly from the US, UK, France, and Germany, and mainly visit during the high season (October-March). More big-spending Latin Americans have been arriving via wholesale FIT bookings in recent years. 2. Direct FIT. Direct FIT bookings continue to grow among hotels that operate under well-established management companies with reputable branding and strong global sales network. These direct bookings present the highest ADRs, thus hotels favour this method. Direct FITs tend not to be seasonal like wholesale FIT and Group/MICE. Of note, Chinese tend to be walk-ins, as they want to look before deciding. 3. OTAs Online booking with Agoda, Booking.com and others play big role during Green Season (June-September). OTAs are especially popular among Asian markets during July and August due to school holidays and proximity. Australians using OTAs often come during Green Season to escape the cold. 4. Group/MICE Most high-end Group/MICE demand comes from the Chinese and Korean markets, generally during the shoulder seasons, and the numbers keep rising for both. US groups are noticeable during the high season, and they spend more on F&B and spas than Asians. However, their average length of stay (ALOS) is only two-three nights. US groups spend more, accounting for 28% of the revenue, while the top European markets pull in a combined 22%, though they tend to stay four-five nights. Closer markets account for less revenue and room nights. Thailand contributes 12%, China comes in at 11%, with the rest of Asia accounting for 19% and “others” provide 8%. Note that the double occupancy factor reveals 1.5-1.8 guests per room. Luxury MICE is traditionally weak due to a lack of facilities and small room count at high-end hotels. According to the report, Pullman could be a “game changer”. New Supply is Coming Horwath has confirmed one Luxury & Upper Upscale hotel is on the horizon for Luang Prabang: The 54-room Centara Grand. Expected to open in 2021-2022, the hotel will be located in the Old Town where the provincial police station for visa extensions now stands. The lead-in category rooms are 56 sqm. The property will feature an F&B outlet, club lounge, gym, spa, meeting room, and swimming pool. A step down in the “Upscale” category, Luang Prabang will welcome two new hotels in 2020-2021. Centara by Centara aims to open in 2020-2021 with 60 rooms. Information on this project has not been disclosed, nor has its location. Ban Lao Hotel plans to open in 2020-2021 with 60 rooms on the Peninsula behind Wat Manorom. They have tapped MyLaoHome to manage the hotel. Ban Lao will offer standard rooms, suites, and villas with pool access, as well as an F&B outlet, gym, and spa treatment rooms. The historic main building will house the lobby and some rooms, and the hotel plans to convert its old vault into a museum. The rest will be in newly constructed buildings. Market Outlook On the Good Side… Demand for Luang Prabang is expected to continue to grow and has huge potential to develop leisure demand with the new hotels. Nature is a big draw, and many say it tops Thailand for its untapped mountains and landscape. Horwath also sees potential for sightseeing and adventure products such as hiking trails, mountain biking, zip lining, and kayaking. “With a variety of stronger leisure demand generators, Luang Prabang will have a greater appeal to a wider spectrum of travellers,” the report states. It noted improved access to neighbouring countries, and points the Lao-China high-speed train, set to open in 2021. Laos can expect a “surge” in arrivals over the next 10 years due to this major infrastructure addition. However, the report warns that if not managed properly, this influx to Luang Prabang could lead to overcrowding in Old Town, which would diminish demand from high-enders. On the Bad Side… The report states that government support in destination marketing is weak, mainly due to a lack of funding. They had a very small budget to carry out the Visit Lao Year 2018 campaign. Another concern is the commercialization of Luang Prabang. The new train could bring mass tourism and impact the destination’s charm and appeal. The city needs a balance between preserving its past and sustainable development. “Luang Prabang should be positioned as a top-tier destination driven by quality over quantity,” the report said, adding that the destination needs to expand the visitor’s ALOS. Limited flight connectivity has hampered Luang Prabang. There are no direct flights from many key Asian cities such as Hong Kong, Tokyo, and Kuala Lumpur, and more capacity from Seoul would fill the growing demand. This will help build new regional source markets, especially during Green Season. The Crystal Ball Horwath envisions Laos as an emerging destination, and believes average annual occupancy at the high-end will return to 40% from today’s 35%. They forecast ALOS in this category will climb from two-three days to around six. The report concludes that Luang Prabang will be able to absorb the increased inventory by 2021, which will facilitate the recovery of ADR and occupancy rates.
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Popular ‘Amazing Race’ Comes to Laos
Season 31 of ‘Amazing Race’ kicked off on 17 April, and the next stop is Laos, with close to 8 million US viewers expected to be glued to their TVs to see who gets bounced in the Land of a Million Elephants. Amazing Race Contestants Though filmed last year, the Emmy award-winning Amazing Race will air the Laos round next week on major US network, CBS. It’s weekly viewer numbers are estimated at 7.65 million, offering great exposure for Lao tourism. The race covers Luang Prabang and Xieng Khouang, and American followers are eager to see what team goes down in Laos. Read: “Which ‘Amazing Race’ Season 31 Team Will Be Eliminated in Laos?”, and stay tuned for the results. CBS Official Amazing Race Site.
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Back to the Wild for Lao Elephants
“The soft release of elephants into the wild is a scientific experiment, and the first in Laos. I can’t wait to see what happens,” said Sebastien “Seb” Duffillot, co-founder of the Elephant Conservation Centre (ECC) “It took a year to get to this point.” That day happened on 5 March, when the ECC team left the sanctuary on foot. They guided a herd of five on a 12-day trek to Thong Mixay. This remote enclave sits in the southern region of the province’s Nam Pouy National Protected Area (NPNPA) near the Thai border where wild elephants live. “ECC’s focus has always been in rescuing individual elephants, but this domesticated elephant soft-release mission into their natural habitat takes species conservation to another level,” Seb explained. “We’re looking for a major outcome.” The Experiment Seb stressed that mahouts are leading the soft release mission, and ECC’s biology team will collect data. “We will not be interfering with local knowledge,” he said.” We’re here for data. It’s an experiment.” ECC Biologist Chrisantha Pinto added, “Our goal in 2019 is to gather as much data as possible on the existing wild elephant population (estimated at 40-50) currently living in the NPNPA, and to perfect our process of data gathering and herding.” Herding is huge. According to Seb, herding is a long process, and the first step in a release is to create a family of five. “This is similar to the wild. We put together a herd with a mother, three females, and a juvenile male.” It starts like university, with an entry exam. “For example, some aren’t able to find water and are not suitable for release,” Seb said. If they pass the exam, they enter the program to form a herd, which takes about eight months. “Elephant herds are matriarchal, and a female leader eventually emerges, by showing signs of maternal behaviour. Others bond to her and with each other,” Seb explained. Next, the new herd moves to isolation at ECC…no mahouts, no people. Then the soft release takes place. “We take them to the release point in the NPNPA, and see if they can do it,” Seb said. “Mahouts will visit weekly and then monthly, and then possibly, never again.” The first phase of the soft release will last four months, before a reassessment. As Seb noted, “There are so many questions, and we are looking for answers.” Seb reeled off a list: Are they too domesticated to be released? Is it even feasible to release them? Will they want to go back to the wild? They know the forest, but can they handle an environment that is not stable like ECC? “Some may have become too humanized, and can’t be released. We’ll wait for the results,” said Seb. “We won’t be sad if it doesn’t work. It’ll be fun to do.” ECC Finance Manager Celine Gibert added, “This soft release is simply a stage in exploratory data collection to test the strength of an unrelated herd outside of our concession, how data collection will work in such thick jungle, and to better understand the traditional knowledge of the mahouts.” The release also affects the villages in the area, she said, but ECC is taking precautionary measures by using visual control, based on mahout tradition. Seb pointed to three benefits of a successful release. “First, it will alleviate food pressure on ECC.” Their daily diets can be 200 kilos each. “They will also be free, but in a protected area,” Seb said, noting that ECC is the only organization that has permission from the government to operate in the NPNPA. “The third benefit is for the released elephants to bond with those in the wild to build a genetic reservoir,” he said. Breeding Data shows Lao elephant’s reproduction rate is extremely low. The country currently has about 450 domesticated elephants and around 400 remain in the wild. Both groups are scattered around Laos. This has led to a fragmented population and interbreeding. “Releasing from different areas is good for the population’s g-nome,” Seb said. Making matters worse, the population is decreasing as Lao elephants have an increasingly higher average age. Further, loggers don’t want their females to reproduce, as this takes them out of work for some three years, and time is money in the domesticated elephant world. “With only 33 cows under the age of 20, the future of Laos’s domesticated elephants is under threat,” Seb said, adding that the country’s ‘breeding reservoir’ could dry up in 15 years. ECC aims to turn this around. ECC biologist Anabel Lopez Perez in charge of the breeding programme, has her hands full, but the Smithsonian Conservation Biology Institute offered to partner with the elephant sanctuary to assist…at a high level. Enter Janine Brown, a world authority on elephant reproductive biology. She heads the endocrinology lab at the institute’s zoo, and came to ECC to monitor elephants’ hormone levels and contribute to a better understanding of their life cycle and needs. “Her research informs what we know about animal behaviour, reproduction, and stress,” said Anabel Seb added, “The least stressed are logging elephants because they need exercise. Even riding an elephant reduces stress levels. We want non-stressed elephants.” Stress also plays into reproductive behaviour, as does a male’s testosterone level. Janine measures testosterone levels for an encounter, and this can be high. According to Seb, male elephants come out once a year to mate, which gives owners a free calf, before the mother gets back to work, in spite of the time/money loss. This male mating period is called “musth”, a heightened hormonal state. “During this time, they can be very aggressive and considered dangerous, and owners don’t want bulls,” Seb said. This has led to selling males overseas or starving them to death for their ivory. Historically, elephant owners let their females roam. Wild males are attracted to those in heat. “This was a very effective technique,” Seb explained. Females have a 120-day menstruation period, and ECC measures stress hormone levels to determine which elephants are suitable for reproduction. At the center three elephants have a wild father, which may help in a release. Changing Roles “Elephants have served us since Neolithic (Stone Age) times,” said Seb, and as previously stated, elephants need to generate income for owners as they cost $25,000-$35,000 and eat tons. Demand has decreased, as has supply. In recent centuries, elephants earned revenue by logging and transport, but today, they have been replaced by pickup trucks, according to Seb. “With their traditional life gone, options for their livelihood have evolved,” he said, noting, “They need a new way to generate income for owners and mahouts or its back to illegal logging, the circus, or the zoo.” Worse, males are considered by some as a way to harvest ivory for big money. He said ecotourism is one way to raise income. Another new model is using elephants as transport for park rangers. “Release is ECC’s choice.” While the elephants’ role is evolving, so is that of the traditional mahout. “Traditional mahout style is no more except in some pockets of Laos,” said Seb. “Otherwise, the traditional, generational mahout livelihood is done.” He continued, “Mahouts’ sons want modern lifestyle. The traditional lifestyle is gone. They don’t want to go back in time. To preserve the past, Seb has set his eyes on creating a museum in Luang Prabang. He has scoped out a French colonial building, and has plenty to put in there. “This will be my baby,” he said. “This is my dream. Follow the release progress on Facebook. Visit ECC. Photos courtesy of ECC. ECC Biologist Chrisantha Pinto
